Why Johnny Can't Stop Sharing Files

Copyright is effectively dead, despite the entertainment industry having won the Grokster caseor maybe even, in part, because it did. The consequences of ignoring the that change are dire.

A few statistics have been bothering me for a while. Here's one: 72 percent of Americans between 18 and 29 years old who use the Internet say "they do not care whether the music they download onto their computers is copyrighted or not."

That's from a survey performed by the Pew Internet and American Life Project in July of 2003. Here are two more: Just a few months ago, as the Supreme Court was getting ready to hear arguments in the Grokster file-sharing case, the Pew project found that over 7 million adults had already copied a file from someone else's iPod or other MP3 device, moving beyond the embattled peer-to-peer networks. And as of July of this year, another Pew survey found that nearly 90 percent of all teenagers were active Internet users.

I don't want to sound overly dramatic, but adding these numbers together leads me to an alarming conclusion: There's a revolution going on. Copyright is effectively dead, despite the entertainment industry having won the Grokster caseor maybe even, in part, because they did. Any law that is ignored by nearly every young adult in the country is no law at all.

History amply supports this view. The U.S. has seen many revolutions in basic legal doctrines, some accompanied by violence (the Revolutionary and Civil Wars), and others largely nonviolent (the New Deal and the Civil Rights movement). But each had the same characteristics as the intellectual-property revolt going on right now: an economically powerful social class with the law solidly on its side; increased enforcement accompanied by increased resistance from an identifiable group claiming the moral high ground; and, ultimately, a complete and often dramatic reversal.

In the late 19th century, for example, railroads, oil companies and the banking industry controlled much of the economic life of the country, with the courts and Congress firmly on their side. But a loose confederation of farmers, progressive intellectuals and urban residents pushed through the passage of the Sherman Antitrust Act, in 1890; and this was followed by even more dramatic revisions of the basic rules of economic behavior that were enforced by conservative-turned-trustbuster President Theodore Roosevelt.

Roosevelt believed that the only alternative to an orderly revolution was violence. "The character of competition has changed," wrote Brooks Adams, one of Roosevelt's principal policy advisors and the great-grandson of revolutionary leader John Adams, "and the law must change to meet it, or collapse."

So why can't Johnny stop file sharing, even when he knows it is illegal?

The short answer is that the copyright system designed in the 18th century simply doesn't work in the era of open standards, high-speed and low-cost data communications, and ever-cheaper and more powerful devices to store, transmit and play digital content. It's intellectual-property law versus Moore's Law. The winner is clear. Only the timing is in doubt.

Those invested in the old system, built around assumptions that creating, copying and distributing content requires expensive physical media, have reacted predictably, and badly. They have fought for, and won, new controls for copyright, including international enforcement, extended time periods and, under the Digital Millennium Copyright Act of 1998, a wide-ranging ban on technologies that can break or even reverse-engineer anti-copying technology introduced into media. They have sued their customersyour children.

They have also leveraged their legal control over content to tighten their hold on markets, demonstrating in the process the danger of giving so much power to so few. In 2000, for example, the major recording labels simply accepted a finding from the Federal Trade Commission that they had engaged in wide-ranging antitrust violations that forced retailers to sell CDs for "minimum advertised prices." The labels later paid over $140 million to settle lawsuits brought by state attorneys general. Over the past few months, New York Attorney General Eliot Spitzer has wrung admissions of misconduct from Sony BMG Music Entertainment and Warner Music Group for pervasive "pay-for-play" schemes with radio stationstransgressions for which the companies were required to pay multimillion-dollar fines.

And again, in just the past few months, Sony BMG has been inundated with bad press, and become the target of a consumer revolt, over its secret introduction into CDs of copy-protection software that potentially exposed millions of personal computers to serious security breaches. The company issued a patch for the problem, but that was discovered to be even more dangerous, and Sony BMG has now issued a recall of millions of discs. Class-action lawsuits have already been filed, and the company has told top performers that expected sales of their CDs could plunge up to 80 percent because of the flap.

Fueling the backlash against the entertainment industry is an emerging ideology among young consumers of collaboration, free culture, open source and bartering value for value in an economy of information. Add to that the long-standing tolerance by the content industries of home taping and other limited, technical copyright violations, and we have a generation of new consumers who don't care what the law says, or even what the Supreme Court says. The law simply doesn't reflect reality anymore. Game over.

There was an alternative to revolution, now squandered, and that was to engage rather than to resist the changing economic and technological dynamics of digital distribution. Instead of making copyright stronger, we could have made it weaker; instead of building in draconian enforcement tools that backfire, we could have engaged young consumers in a real negotiation about what was economically reasonable behavior; instead of charging more for physical products that are increasingly unnecessary, the content industries could have embraced a digital channel sooner, and set realistic prices, even if it meant accelerating the decline of CDs and other media.

The model for such a compromise was there in the very first copyright law, England's Statute of Anne (1710). On the one hand, this statute granted vast monopoly powers to creators of IP, but also made it a crime to charge prices deemed unjust and unreasonablea principle which today finds partial expression in the concept of "fair use." Legal scholar Wendy Gordon has long argued that "fair use" is a kind of safety valve for market failures caused by the granting of monopolies to creators of IP. But now consumers have taken over the operation of this safety valve and forced it open wide enough to wash away most of the system.

Why should you care? There are at least two reasons. First of all, today's teens are tomorrow's customers, employees, suppliers and shareholders. As they begin their economic lives, they will bring with them a paradigm of how information should be valued and exchanged that upends the basic assumptions of the first 50 years of commercial computing.

The second, and more ominous, reason is that there are strong similarities and connections between the entertainment industry and the software industry. The gulf between what IP law says and what software users do is already wide.

For the most part, the software industry has avoided the ham-fisted and counterproductive tactics of entertainment giants. War hasn't yet been declared. But if we aren't careful how we structure our future transactions with the revolutionaries, we could easily find ourselves caught in the flood.

Larry Downes is Associate Dean of the UC-Berkeley School of Information Management and Systems. He is the author of Unleashing the Killer App and The Strategy Machine. His next column will appear in March.